CRE Buyer's Broker
Santa Barbara, CA · Member since 2009 · 90 posts · 13 votes
CRE Buyer's Broker
Most Popular Reply
Don KonipolBusiness Member
Investor · The Woodlands TX / Avon, CT · Member since 2009 · 6k+ posts · 10k+ votesYou have brought up some good points. the world of commercial real estate is in many ways not an extension of residential real estate; it is a completely different investment animal.
The are commercial brokers that will represent you on the buy side, but they want alot more confidence that you have the ability to close a transaction than residential brokers do. Residential brokers were educated to believe that almost everyone can buy a house - even those with marginal credit and little capital (maybe changing now!). Before a good commercial broker spends time, effort and reputation on you he will want to see proof of how much capital you have to invest and your ability to obtain financing for a commercial project. Since a larger part of your ability to obtain financing is dependent on your experience, a resume or at least summary of relevant experience is essential. Puts the new player at a distinct disadvantage.
If you actually want advice as to what to purchase, what's a good deal, etc. this is available for a fee. You can contact the CRE association, (counselors of real estate), obtain a list of their members with the CRE designation, and engage their services to whatever extent you wish. Please note that CREs are not commission based, most will charge an hourly consulting fee.
If this is not what you're looking for please explain and I will give you an answer to the best of my knowledge.
26 Replies
- Investor, Entrepreneur, Educator · Springfield, MO · Member since 2009 · 21k+ posts · 12k+ votes16y
LOL, Joe, I would have thought it would have been the other wy around between the CPA and the attorney.
Commercial is another world! Not familiar with your area, but in mine, if you need representation as a buyer, look for an agent that does commercial, calling brokers will get you to thier listings.. Commercial brokers may not have a co-broke arrangement as residential brokers do through the multi-list. While there are commercial properties on the MLS, many are not. Commercial Brokers may not even be Realtors or a member of the local Board of Realtors(well, that makes sence!)
They will list a property to represent the seller, hang the sign out and advertise it to a target base, like retailers or resturant chains or manufaturing concerns. You'll see their ads in professional magazines specific to the industry suited for that property.
So, they have thier property to sell, they sometimes do not have time to run the countryside looking for other commercial properties that are marketed in a similar fashion by other brokers. Most won't drive you around town looking and buy your lunch like an agent will either.Some commercial brokers will work out something with another agent if they have a good buyer, but many will not, if they are to be paid, the buyer will pay that agent. Co-brokering is not required.
I suggest you call the brokers to see what they have. If that type of property meets your investment requirements, you can then contact the attorney to assist you, that's usually all the horsepower you'll need for representation on the contract and legal front. As to doing the due diligence, you should be able to find a CPA to give an opinion, Charles is here on BP and I would think that you could have him run the numbers, be sure to pay him to do so, you don't need a CPA in town really since we have all the gadgets we do now.
I'm a little worried here too, because you're getting into commercial and sounds like you're brand new to it, which makes me wonder if you might not need a mentor in your area or in the investment area for due diligence. It's not just briks, mortor and financial statements to look at. But, you be the judge of that. Good luck, Bill
- Santa Barbara, CA · Member since 2009 · 90 posts · 13 votes16y
Thanks FE for the reply. So there are no CRE buyer brokers. One company (who shall remain nameless) offers consultancy, and investment strategy and planning, but when you take them up on it, a broker just sends you listings, over your budget, and expects you to hand over a check. A mentor would be great (anyone out there?), but my research shows that you need to look nationally for good deals. In my city in CA for example, there are a lot of for lease signs, and that's all. I still need a CPA for other accounting and tax reasons, but Charles sounds like a good option.
- Investor, Entrepreneur, Educator · Springfield, MO · Member since 2009 · 21k+ posts · 12k+ votes16y
Originally posted by Joe Strickley:
Thanks FE for the reply. So there are no CRE buyer brokers. One company (who shall remain nameless) offers consultancy, and investment strategy and planning, but when you take them up on it, a broker just sends you listings, over your budget, and expects you to hand over a check. A mentor would be great (anyone out there?), but my research shows that you need to look nationally for good deals. In my city in CA for example, there are a lot of for lease signs, and that's all. I still need a CPA for other accounting and tax reasons, but Charles sounds like a good option.
Not a good sign when all you have are empty commercial buildings with signs for lease, might make me think twice about being a commercial landlord there! But really, that's in alot of places, and it will probably get worse in that arena. Better have deep pockets and hope the return comes back in appreciation!
Let me make a wild suggestion here. FInd a business owner who would be interested in buying a building. Partner with them, say in an LLC. Then lease it to his company. Then make an arragemnet to seel your interest in the holding company in the future. It's easier to find the tenant first and then a building than a empty building and then a tenant!
As for your CPA, I'd suggest you contact Charles, I have had "outside coversations" with him about accounting issues in creative environments we will say and real estate. I have found him to be professional and knowledgable. From that I trust his judgment in his application of his trade. But that is not an endorsement since he doesn't pay me to say that kind of stuff! LOL I think you would be fine with Charles if you select him. Good luck. (Now I'll see if he votes for my post, LOL) - Santa Barbara, CA · Member since 2009 · 90 posts · 13 votes16y
It makes a lot of sense to invest in a tenanted property in this market. In fact, they are the only investments I am considering. I'll vote for your post if Charles doesn't.
- 16yDon KonipolBusiness MemberInvestor · The Woodlands TX / Avon, CT · Member since 2009 · 6k+ posts · 10k+ votes
You have brought up some good points. the world of commercial real estate is in many ways not an extension of residential real estate; it is a completely different investment animal.
The are commercial brokers that will represent you on the buy side, but they want alot more confidence that you have the ability to close a transaction than residential brokers do. Residential brokers were educated to believe that almost everyone can buy a house - even those with marginal credit and little capital (maybe changing now!). Before a good commercial broker spends time, effort and reputation on you he will want to see proof of how much capital you have to invest and your ability to obtain financing for a commercial project. Since a larger part of your ability to obtain financing is dependent on your experience, a resume or at least summary of relevant experience is essential. Puts the new player at a distinct disadvantage.
If you actually want advice as to what to purchase, what's a good deal, etc. this is available for a fee. You can contact the CRE association, (counselors of real estate), obtain a list of their members with the CRE designation, and engage their services to whatever extent you wish. Please note that CREs are not commission based, most will charge an hourly consulting fee.
If this is not what you're looking for please explain and I will give you an answer to the best of my knowledge.
- Investor, Entrepreneur, Educator · Springfield, MO · Member since 2009 · 21k+ posts · 12k+ votes16y
Originally posted by Joe Strickley:
It makes a lot of sense to invest in a tenanted property in this market. In fact, they are the only investments I am considering. I'll vote for your post if Charles doesn't.Joe (thanks for the vote, lol) We just got a commercial deal in DWF area. It was a forced sale in a divorce and was full with good tenants. Right now, I would not even entertain the thought of buying a retail/office/wharehouse property now from an owner who had tenants and held the property for sale. If it is not a distressed situation and just a property listed for sale, the price won't be right.
It would have to be out of a bankruptcy, estate, divorce or a partnership break up or something before I would even listen to the deal, and it would have to be full enough to carry itself the day of closing. Those are probably few and far between. The one in DFW fell into place, we weren't really looking.
Those kinds of deals will be few. OTH, finding a partner as I mentioned above, is alot easier, most small business owners that have been in business awhile would rather own their own building. They are easy to find.
Now, leverage, if you buy one on your own, you'll have 20/25% for the down and costs to acquire it. If you partner, you may get away with half as much in the deal, but no expenses and true you get half the profits, but the same dollars invested in this manner will be better diversified in two buildings with two partners instead of you bing 100% on the hook for one. You have also probably increased your odds of better appreciation over a longer term having the two properties, not relying on that of just one. You'll also have a "buying tenant" in both units, so vacancy should be down and the property will be better maintained over the term.
Tax wise, you can do either in a passive or active manner and split deductions accordingly.
I would think that there would be many business owners who would like to get in on lower RE prices now, but can't since they may well be concerned about operating capital and not seeking to put a chunk of cash in a building that will take some time to recoup that investment from the differences in renting.
I mentioned buying as a partner, you can do that or you can go it alone, buy it and immediately put your buyer in under several methods so you regain that up front money for the next deal.
Anyway, thought I'd drill a little deeper on this. Good luck, Bill
- Santa Barbara, CA · Member since 2009 · 90 posts · 13 votes16y
Don, yes, thanks, that is part of what I am looking for I am will follow through. I am a cash buyer, and that is fairly easy to prove, which makes it all the more puzzling. Still, if I got a nickel everytime a broker (or attorney for that matter) didn't return a call, my cap rate on my phone bill will make it unnecessary to invest in CRE at all.
- Santa Barbara, CA · Member since 2009 · 90 posts · 13 votes16y
FE, the only reservation about partnering is you have got to be confident the business venture is a runner. In this climate, new business ventures don't exactly have a head start. I'd want to see a strong track record, which is difficult for start ups.
- Investor, Entrepreneur, Educator · Springfield, MO · Member since 2009 · 21k+ posts · 12k+ votes16y
I would either Joe, I said business owners who had been in business awhile, meaning a sound business, established, still in a mature growth phase. You sell them off and take 5 or 10 years of appriciation...just a way of doing them. Good luck..
- Real Estate Broker · Canton, GA · Member since 2010 · 15k+ posts · 11k+ votes16y
I am a commercial real estate broker and owner of my company.
I can tell you from my perspective there are many buyers that are clowns out there for sure. Every get rich quick hair brained scheme out there.
When you become a commercial broker or investor one thing will be perfectly clear.
TIME IS MONEY
When working with investors I look at how out there the plan is.The more imaginative the plan the more things can go wrong and the more chances for failure.
So when you only get paid when you close you look at probability and percentages like a hawk.
I have many listings mainly in the Multifamily and Retail sectors.I do work with a small group of investors.Since most of my time is spent marketing my clients listings I only work with the most qualified investors.
If you have money provided by proof of funds valid within the last 30 days AND you are realistic to the market then a broker might work with you.
If you have NO to LITTLE money relative to what you want to buy and NO experience then you don't bring much value to the table. People like my state because of the CAP's you can achieve versus other parts of the country.
I would have a brief phone conversation explaining your goals to a broker to set a plan in motion.
- Santa Barbara, CA · Member since 2009 · 90 posts · 13 votes16y
Thanks for the input Joel, and I'm sure your comments are borne of many years of experience. I clearly have "mug" tattooed on my forehead.
I don't have an intricate strategy, with demographic surveys, IRR and NPV calculations, leveraged buyouts, and city planners on my pay roll. I just want to invest in real estate. I don't want to make lots of money, and I have cash. What could be simpler? If that turns away brokers, I'd be interested to know why? But I guess as a self-confessed mug, I might not be so willing to open my check book at the first suggestion. Could that be the problem? - Real Estate Broker · Canton, GA · Member since 2010 · 15k+ posts · 11k+ votes16y
Joe I will give you an example as to why the phone meeting is important.
Investor number 1:
Calls and wants a Class A property in urban core for a 10 CAP.In my area that isn't going to happen going into the property.
That person goes on the bottom of my list.Even though they are a "ready,willing,and able" buyer they are unrealistic.
Investor number 2 :
Wants a class B,C property with a 9 to 10 cap going in. I will put this buyer higher on the list as there are many properties I can find them and chances of closing are good.
Another example from a Residential side.
Buyer looking for an 80k house cash or is approved with finance.You go on MLS stats and for the last year there were 8 properties hit the market in there buying area.
They all went under contract in 5 days or less.This tells a broker that even if you find the buyer a property in that range there will be multiple offers on it and the chance your will be chosen is low.
I had a lady call me years ago and the property she called on went under contract in 24 hrs.She then said it had been 14 months since a property was in her price range ! LOL
How much cash do you have ballpark BTW?
I don't really know your investing goals.Each asset class for commercial investing has it's pluses and minuses.
- Real Estate Investor · Phoenix, AZ · Member since 2009 · 1k+ posts · 1k+ votes16y
To what extent has Loopnet (and CoStar) become like an unofficial MLS for commercial real estate? Although a listing broker is not required to list on those sites, it seems to me that it would be quite poor service for an agent to not list on those sites.
- Real Estate Broker · Canton, GA · Member since 2010 · 15k+ posts · 11k+ votes16y
My listings go on Loopnet and Costar.
Costar is one fee monthly for unlimited listings.
Loopnets model is a different animal.YES anyone can post a listing FREE.The problem is less than 10 percent of loopnet buyers see the listings.
Loopnet knows this and it is how they generate their fees.
To be a premium member based on your number of listings can get real expensive quick.This is why I only take realistic sellers as to give them proper exposure I have to outlay plenty of capital.
Loopnet does give me a lot of leads and help close some deals.It is not the only avenue however but part of the overall puzzle.
- Santa Barbara, CA · Member since 2009 · 90 posts · 13 votes16y
Joel, I'm not sure I'd want to disclose my cash hoardings on a public forum, but it is enough to buy outright a NNN Starbucks. I haven't been basing my expectations on what I want, but on what I see being offered, so to turn the question round the other way, are listings being realistic about what they are offering, due diligence hurdles notwithstanding.
- Real Estate Broker · Canton, GA · Member since 2010 · 15k+ posts · 11k+ votes16y
Depends on the sellers.Some might be wanting to sell for the first time in 4 to 5 years and not be in tune with the market.
Others are trying to solve personal or business problems in their lives by trying to extract a certain amount of money out of the property by selling.
Often repeated phrases I use:
"No amount of marketing in the world will sell an overpriced listing"
"Your properties current market value and what you need to get out if have absolutely nothing to do with each other."
I wouldn't touch a Starbucks with a ten foot pole.They are contracting heavily nationwide and repositioning.When they were growing they had no competition.
Now every restaurant chain practically has some kind of fancy coffee or frapaccino.Many now instead of a 4 dollar drink at Starbucks can go to Mcdonalds and get similar for a 1.00.
I know it's not the same but people will trade quality for big savings for OK taste to get a fix.
I know about the restaurant industry and was in it for 10 years before getting into real estate.
Same goes for Blockbusters.They are getting crushed by Netflix and Redbox DVD.They are fixing to go into bankrupcty and go under.
As lifestyles and technology changes some business will flourish and others will expire.This is why it's important to know what is growing and what is contracting so you aren't left with an empty space and no cash flow.
I personally like Walgreens or CVS's. They sign long term leases and with the boomer generation retiring and living longer anything to do with prescriptions and medical is booming.
Used to returns were a 7 cap in a hot market but I have seen 9's and you probably can get in the 10's.
Not as sexy as some riskier investments but you get mailbox money with no maintenance or headaches from a billion dollar tenant.The escalations are fewer and not as big of jumps but you get the stability and piece of mind.
Here Auto zones,Napa auto parts,and Advanced autos do well also.
So what kind of investment you make depends on many factors.
I talk to investors everyday so when I go in for a listing appointment I have that knowledge to share with a seller.I often time tell them "If this number is your expectancy I do NOT want your listing" and I then tell them that they do not need to sell in this market.
They are usually shocked and either keep the head in the sand or come to reality and list it right or wait for a recovery.
If in the sand they list with someone else and 2 to 3 agents later they call me back or it just keeps expiring.Either way I won't waste my investors time with overpriced trash.
I also make sure the sellers provide accurate info when I list the property. No omitted numbers,puffed numbers,fancy pro-forma junk trying to sell the upside of the property.
If you want to PM me privately we can converse more. I am always looking for more nice,quality investors to work with.
- Santa Barbara, CA · Member since 2009 · 90 posts · 13 votes16y
Well, I've been sending out emails to the CRE association, and its the same old story. Nobody is interested, so I'm guessing $10 m is the entry requirement for CRE investing, and nobody want to talk to the casual investor, unless you can pass some sort of cryptic secret society test. So I give up. Thanks for all the useful insights.
- Lender · Los Angeles, CA · Member since 2009 · 1k+ posts · 2k+ votes16y
Joe,
First, you’re going about this backward and I think you’re giving up before you even started. This “team in advance†myth was written about by Robert Kiyosaki and has killed the dreams of many new real estate investors. Forming a team of high priced professionals will not get you what you really want – viable deals. It’s water under the bridge for you at this point but finding deals, not professionals, is where I’d be focusing my time. I know you won’t believe it now, but once you have a decent deal in hand everything else, including the professionals, will fall into place.
More importantly, you noted, “I don't have an intricate strategy, with demographic surveys, IRR and NPV calculations, leveraged buyouts, and city planners on my pay roll. I just want to invest in real estate.†I get your sarcasm, but in fact you do have to be as specific as possible with any broker. Intricate strategy, no. Exit strategy, yes. IRR and NPV, no. ROI, yes. City planner, no. Specific neighborhood and or streets, yes. You get my point. I’m sure you haven’t said to a broker that you “just want to invest in real estate ,“ but though you said you have an investment strategy, I don’t get the sense here you’re specific enough with them. Do you have well thought out written buying criteria, in just a handful of specific bullet points, that you email to them? What has been their response? If your criteria are vague or generic, you’ll just go on their pile of other investors that have money in their pockets and no real sense of what they want or a way to express it. Maybe they’ll send you their listings. Sound familiar? Why should they throw the good deals to you?
There is a lot of money out there (here actually, I’m two hours south of you). Brokers are getting calls all the time from well funded investors who continually hear that “Cash is King†and believe they can make unreasonable demands for its use. Cap rates in Southern California are still pretty low, yet deals are getting done – just not that many. The frustration many brokers have now is the lack of viable inventory. How’d you like to be in a business where people are breaking your door down with cash and you have nothing to sell them? Understand, there’s frustration on both sides.
I recently received an email blast from a Marcus and Millichap broker comparing his clients who actually do deals, and are willing to buy at a 6 cap, to those who expect to buy apartments for $50k a door in Southern California at a 10 cap. It was a rather cynical and somewhat unprofessional email in my opinion, but did highlight the frustration evident on both sides. As cash buyer, you’ve done a good job expressing yours above.
I’ll share that I have a similar problem and have gone down the same route as you. Rather than get upset that the world won’t listen to me because I’m a little guy with a "me-too" strategy, I’ve decided to lend money and JV with some of the local rehabbers while I wait. And though is does sound like you really do have enough cash to get their interest, you don’t have to use CBRE and M&M to buy commercial properties. While most rehabbers/wholesalers focus on single family homes, they are adept at meeting distressed sellers and often meet commercial property owners who want to sell without going through a broker. These properties they have fewer buyers for, especially cash buyers, and they always want to increase their buyers list. You might consider changing your strategy.
Jeff
- Santa Barbara, CA · Member since 2009 · 90 posts · 13 votes16y
Jeff, thanks for the sympathetic reply, and lending your ear. The question is how do find deals, if all you have is listings, and brokers. I don't wish to sound cynical, but I've been watching, blogging, and reading around the subject for some time. On the one hand, you hear that CRE prices have dropped 40%, and that NNN are such great little hassle free earners, but on the other hand, you hear every objection as to why these aren't such great deals. That's why I tried to find, (even buy) advice, because the push and pull is more than I want as a passive investor. I may as well wait for the economy to rebound and go back to fixed income securities, which is a simple as buying a cappuccino.
When communicating directly with brokers, I have tried to be as concise as I can as to what I am looking for. Also my expectations are not out of sync, but my aversion to risk may be. I personally think the team idea is a good one. But I accept that if you find a good deal, the team with fall into place. What would clinch it for me is finding a broker that speaks the same language.
I was interested by your comment that inventory levels are low, and that you are in the hard money game. I've also looked at lending, but it doesn't sit too well with my risk profile. Mind you fixed incomers are now piling into junk bonds in a desperate search for income. So how do you go about meeting rehabbers?
- Lender · Los Angeles, CA · Member since 2009 · 1k+ posts · 2k+ votes16y
The best place to meet rehabbers and wholesalers is through your local real estate clubs. Initially, you can find these at www.meetup.com
You can also ask local realtors.
Most of the attendees will be wannabe investors with little or no cash that want to learn. There’s nothing wrong with that but neither you nor they will be of any help to one another.
If there are introductions, announce at the club you have money to lend and the few real dealmakers will be on you like white on rice. Ask them which other clubs the experienced dealmakers attend and visit those. Birds of a feather… Do this a few times at a few different clubs. You are now in the game.
Have you considered buying notes instead of the physical assets? Beats the stock or bond market.
- Santa Barbara, CA · Member since 2009 · 90 posts · 13 votes16y
You mean trust deeds? I have read up on them, and been in touch with the Norris Group, who have a few endorsements. I have been meaning to follow up on it, but it means revising all the stuff I read, and gleaned from other investors again. The one thing that concerned me, was so-called "skin in the game" equity based on future values. Have you had any successes? I believe I started a thread on Bigger Pockets.
- Real Estate Investor · Phoenix, AZ · Member since 2009 · 1k+ posts · 1k+ votes16y
Joe, finding rehabbers who want your money is very easy. But finding rehabbers who are worth your money is harder.
If you want people to contact you regarding funding, all you need to do is create a new thread on BP announcing that you wish to make hard money loans.
- Santa Barbara, CA · Member since 2009 · 90 posts · 13 votes16y
Thanks Vikram, I'd probably only do this through an intermediary.
- Landlord · Seattle, WA · Member since 2010 · 3k+ posts · 1k+ votes16y
Joe, looks like you are getting some good responses. It seems I missed this thread several days ago. I've been caught up in a tax audit. This has been the year for audits. Not sure if I can help, but your more than welcome to PM.
Never forget though that there are great resources here when you need them as well. The deal analysis forum is a great place to get insights and I have found many members to be quite giving when you are looking for advice.
By the way Bill, thanks for the plugs. You have my votes. :D
Do you have a specific type of CRE investment you are looking into or specific market place?
- Santa Barbara, CA · Member since 2009 · 90 posts · 13 votes16y
Hi Charles. I wish I had one or two properties I could get you to look at. Single tenant, NNN is the investment I am focusing on, and/or multi-unit residential. The only company that gets mentioned in glowing terms is Walgreens, and apparently even they are now threatened by Walmart and others. However, they are a bit out of my league price wise, without resorting to leverage, which I'm hesitant to do. USPS is probably a good fit for my profile, but as someone else mentioned I'd need to be in bed with the local town major. I also learned today that inventory is very low, so that may explain limited choice.
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